Xilinx Inc. and Subsidiaries - Page 13

         exercise price, the call premium is the amount, in excess of an              
         ESO’s intrinsic value, that a purchaser would be willing to pay              
         for the ESO.  An ESO’s call premium is difficult to measure                  
         because it, unlike the call premium of a publicly traded option,             
         cannot be valued daily based on market transactions.  FASB                   
         readily recognized that the IVM fails to measure adequately the              
         call premium relating to ESOs.9  Nevertheless, the IVM remained a            
         permissible accounting method during the years in issue.                     
         Although the FVM was added as the preferred method in 1996, most             
         companies continued to use the IVM during the years in issue.                
              Pursuant to the FVM, a corporation must measure the amount              
         of the expense as equal to the fair value of the ESO on the grant            
         date and amortize such expense over the vesting period.  Under               
         SFAS 123, fair value is measured using option pricing models that            
         consider the following six attributes of equity-based                        
         instruments:  (1) The exercise price, (2) the expected life of               
         the option, (3) the current price of the underlying stock, (4)               
         the expected price volatility of the underlying stock, (5)                   
         expected dividends, and (6) the risk-free interest rate for the              
         expected life of the option.                                                 
              The FVM utilizes option pricing models, such as the Black               

               9  FASB, in SFAS 123, stated: “Zero is not within the range            
          of reasonable estimates of the value of employee stock options at           
          the date they are granted, the date they vest, or at other dates            
          before they expire.”                                                        

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Last modified: May 25, 2011